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Forex: Ideas You Can Trade - USDCHF Resumes Long-Term Down Channel

Posted by Steven Hatzakis on Jan 20, 2015 3:02:00 AM

USDCHF: Following Last Week's Huge Drop, Longer-Term Bearish Channel Now Main Trend Driver

The medium term daily candle chart below shows the price history of United States Dollar (USD) versus the Swiss Franc (CHF). This currency pair is known as USDCHF,and trading around .8785 around time of publication.

Last Thursday when this pair was reviewed in the Ideas You Can Trade series, the Swiss National Bank (SNB) had just announced a discontinuation of its Minimum Exchange Rate peg for the EUR/CHF at 1.20, and USD/CHF also dropped nearly 1870 pips in a very short period of time - alongside other CHF priced pairs - following that news.

Now that USDCHF is trading back within the bearish channel seen below on the daily chart (parallel white lines), that channel appears to be the main trend driver that has resumed since the pair has normalized, following the SNB's move to no longer support a weaker CHF artificially (against the EUR near 1.20).

If USDCHF stays within the above mentioned bearish channel then a continuation lower could follow, with support near .8700 in the short term. A breakout above the upper resistance line near .8900 of the channel could enable a recovery higher. 

Below are examples of how to trade a bearish continuation or a bullish reversal:

1.  BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ .8822 with a Limit to take profit @ .8915 and a stop-loss @ .8734 Risk/Reward Summary: Limit risk = +93 pips profit / (-88) Stop-loss risk = Gain to Loss ratio =  1.05

2.  BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ .8677 with a Limit to take profit @ .8544  and a stop-loss @ .8748  Risk/Reward Summary: Limit risk = +133 pips profit / (-71) Stop-loss risk = Gain to Loss Ratio = 1.87

Medium term daily candle chart:

USDCHFDaily January 20 2015 note

Topics: USDCHF, Switzerland, $CHF, forex trading, US Dollar, technical analysis, USD, Dollar Swiss


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